Saudi Arabia, Russia reach oil output deal and urge others to keep promises

Saudi Aramco's Ras Tanura port. Saudi Arabia and Russia have agreed to extend the historic production cuts deal for at least one month. (Aramco)
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Updated 04 June 2020

Saudi Arabia, Russia reach oil output deal and urge others to keep promises

  • Big two OPEC+ producers will extend production cuts but want compliance from all members

DUBAI: Saudi Arabia and Russia have reached agreement on extending their oil output cuts and are taking a firm line with other producers to keep their pledges.

Ahead of a meeting of OPEC+, the two biggest producers in the alliance are telling others they must adhere to agreed production guidelines or risk a return to the market chaos of April, when some oil prices hit all-time lows.

An official at one Opec delegation told Arab News an agreement was in place between Saudi Arabia and Russia to extend the historic 9.7 million barrel cuts deal for at least one month, with a regularly monthly review— but it was contingent on all OPEC+ countries keeping their promises on current production levels.

“There is no dispute between Saudi Arabia and Russia on this,” the official said. “They are sticking by the rules, and they want to put pressure on to make all OPEC+ members do the same.”

Most other OPEC+ countries are believed to be willing to stick by the April cuts for an extended period. Nigeria and Iraq are considering the proposals for stronger compliance.

A “virtual” OPEC+ meeting could still go ahead at short notice, or could take place on June 9 as originally scheduled. Saudi Arabia has additional bargaining leverage in the 1 milion extra barrels it cut voluntarily, which could be reinstated at the end of this month 

Crude prices, which topped $40 a barrel for Brent this week partly on hopes that the cuts would be extended, reflected the late uncertainty, and slipped back to just over $39.

Oil experts do not expect the negotiations over compliance to derail a long term OPEC+ deal. “Compliance is always an issue, but all will want to avoid any instability,” said Robin Mills, chief executive of Qamar Energy consultancy. “It’s quite an achievement to get to $40 from where they were a few weeks ago.”


Oil falls as rising virus cases overshadow demand recovery

An oil tanker ship at a port in Burgas, Bulgaria. Most market participants expect more downward pressure on oil, with COVID-19 ravaging the landscape. (Shutterstock)
Updated 05 August 2020

Oil falls as rising virus cases overshadow demand recovery

  • Declines come after WTI rose 1.8% and Brent climbed 1.5% on Monday; renewed lockdowns weigh on prices

LONDON: Oil prices eased on Tuesday on concerns that a fresh wave of COVID-19 infections will hamper a global demand recovery just as major producers ramp up output.

US West Texas Intermediate (WTI) crude futures were down 67 cents, or 1.6 percent, at $40.34 a barrel, while Brent crude dropped 71 cents, or 1.6 percent, to $43.44.
The declines come after WTI rose 1.8 percent and Brent climbed 1.5 percent on Monday on better than expected data on manufacturing activity in Asia, Europe and the United States.
News from Asia and Europe is adding to concerns that the infection crisis may be spreading in a global second wave, not just in the United States and Brazil, said Paola Rodriguez Masiu of Rystad Energy.

HIGHLIGHTS

• News from Asia and Europe is adding to concerns that the infection crisis may be spreading in a global second wave, not just in the United States and Brazil, said Paola Rodriguez Masiu of Rystad Energy.

• Producers in the Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, are raising output this month, adding about 1.5 million barrels per day of supply.

• Analysts estimate that US refined product stockpiles rose last week, according to a preliminary poll ahead of data from the American Petroleum Institute and the US government on Wednesday.

Denting fuel demand, cities from Manila to Melbourne are tightening lockdowns to battle new infections, while Norway has stopped cruise ship traffic in the latest European travel alarm.
In a further sign of a patchy rebound in demand, analysts estimate that US refined product stockpiles rose last week, according to a preliminary Reuters poll ahead of data from the American Petroleum Institute and the US government on Wednesday.
At the same time, producers in the Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, are raising output this month, adding about 1.5 million barrels per day of supply. US producers also plan to restart shut-in production.
“Most oil market participants expect more downward pressure on oil ... with COVID-19 ravaging the landscape and OPEC+ adding more barrels into play,” said Stephen Innes, Chief Global Markets Strategist at AxiCorp.